On 29 May 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as an update on the Indonesian economy, inflation, credit ratings, business sectors that have been opened up to foreign investment, IPOs, the palm oil industry, and more.

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The central bank of Indonesia (Bank Indonesia) sees easing pressures in the global economy in May 2016, reflected by the rising crude oil price. On Thursday (26/05), crude futures exceeded the USD $50 per barrel level for the first time since November 2015 (supported by production disruptions in Canada). Although oil futures declined again the following day on profit taking, the rising trend has persisted. In early 2016 crude oil traded below USD $30 a barrel, plunging some 21 months due to the global supply glut and weak global economic growth.

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Inflation is under control in Indonesia. Based on the latest data from Statistics Indonesia (BPS), Indonesian inflation eased to 3.60 percent (y/y) in April 2016, well within the target range of the nation's central bank and central government. However, inflationary pressures in Southeast Asia's largest economy may rise in the second half of the year because there is a big chance that the El Nino weather phenomenon is to be followed by the La Nina weather phenomenon. Both weather phenomenons impact heavily on Indonesia's agricultural output.

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The government of Indonesia revised down its forecast for economic growth in 2017 to the range of 5.3 - 5.9 percent (y/y). On Friday (20/05) Indonesian Finance Minister Bambang Brodjonegoro informed parliament about the change in the growth outlook (related to the 2017 State Budget). Initially, the government projected Indonesia's 2017 GDP growth in the range of 5.5 - 5.9 percent (y/y). Brodjonegoro did not explain, however, why the government decided to revise down its GDP growth forecast in the 2017 State Budget.

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On 8 May 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as Indonesia's Q1-2016 gross domestic product (GDP) growth, April deflation, manufacturing activity, the labor market, unemployment, the automotive industry, and more.

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Indonesia's April deflation of 0.45 percent month-to-month (m/m) was slightly higher than estimated (the general consensus among analysts was 0.29 percent m/m deflation in April 2016). Traditionally, Indonesia experiences deflation in April as food prices ease due to the harvest season. This year, however, deflationary pressure was higher than usual as, per 1 April 2016, Indonesia's premium gasoline and diesel fuel prices were cut by IDR 500 (approx. USD $0.04) per liter, thus curtailing transportation costs. Indonesia's annual inflation rate now stands at 3.60 percent (y/y).

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On 1 May 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve political and economic matters such as the 12th economic policy package, problems related to the land reclamation project off the coast of Jakarta, an update on inflation, the palm oil industry, smartphone usage, the most profitable companies, and much more.

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The holy Islamic fasting month (Ramadan) is set to start in early June. One month later Indonesia will celebrate Idul Fitri (Lebaran), the celebration that marks the end of the Ramadan month. During Idul Fitri millions of Indonesians will travel back to their places of origin to spend some time with their families, a tradition called mudik. Although the Ramadan is a month characterized by self-control, this month and the subsequent Idul Fitri celebrations always cause rising consumption of food products as well as rising consumer spending on clothes, shoes, bags, and other articles.

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The central bank of Indonesia (Bank Indonesia) kept its key interest rate (BI rate) at 6.75 percent at the April policy meeting. This decision was in line with expectations. During the three policy meetings conducted in the January-March 2016 period Bank Indonesia had already cut its BI rate by a combined 75 basis points as inflation and the current account deficit are under control, while the Indonesian rupiah has been strengthening against the US dollar since the start of 2016. Last week, Bank Indonesia announced it will adopt the seven-day reverse repurchase rate (reverse repo) to replace the existing BI rate as the bank's key monetary tool.

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Indonesia's Gini ratio (or Gini coefficient), which measures the degree of inequality in income distribution, improved slightly in September 2015. According to the latest data published by Statistics Indonesia (BPS), the Gini ratio of Indonesia fell from 0.41 in March 2015 to 0.40 in September 2015, indicating that income distribution inequality slightly declined (a coefficient of zero expresses perfect equality, while a reading of 1 implies maximal inequality). The modest improvement occurred in the urban areas of Indonesia where the Gini ratio fell 0.1 point to 0.43. In the rural areas the ratio remained stagnant at 0.33.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the June 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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Emerging currencies in Asia, led by the Indonesian rupiah exchange rate, strengthened in the past week on positive economic data from the US and China, the world’s two largest economies. Companies in the US added more jobs than expected in June 2014, while manufacturing in China grew at its fastest pace in 2014. Improving economies of the US and China are important for Asian countries as it boosts Asian exports. Moreover, Indonesian inflation and trade data contributed to positive market sentiments.

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Inflation in June 2014 increased by 0.43 percent (month-to-month, mtm) in accordance with the traditional pattern ahead of the holy fasting month of Ramadan and Idul Fitri celebrations. These occasions always trigger inflationary pressures as consumers increase spending. However, June inflation remains under control and is even lower than the historical average in June in recent years (0.56 percent mtm). On a year-on-year (yoy) basis, inflation stood at 6.70 percent, thus continuing the downward trend since the beginning of 2014.

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Head of Statistics Indonesia (BPS) Suryamin announced on Tuesday (01/07) that the number of poor people in Indonesia declined slightly to 28.28 million people (or 11.25 percent of the total population) in March 2014, from 28.60 million (11.46 percent of the total population) in September 2013. However, compared to March last year, poverty has increased by 110,000 people due to high inflation and a slowing economy; economic growth slowed to 5.78 percent in 2013 and this decline continued to 5.21 percent in the first quarter of 2014.

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The Indonesian rupiah exchange rate is appreciating sharply on Monday (30/06). By 15:13pm local Jakarta time, the currency of Indonesia had strengthened 1.31 percent to IDR 11,838 against the US dollar. Main factors that cause this performance are the weakening US dollar (as a slowdown in the US economic recovery evokes expectations that the Fed Rate will not be raised soon) and falling oil prices; the US benchmark West Texas Intermediate declined 30 cents to USD $105.44 in mid-morning trade while Brent crude fell 22 cents to USD $113.08.

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The Indonesian rupiah exchange rate depreciated 0.07 percent to IDR 12,099 per US dollar on Thursday (26/06) based on the Bloomberg Dollar Index, thus extending its recent weakening trend. This trend is expected to continue further as Bank Indonesia said it would allow rupiah depreciation in order to make the country’s exports more competitive (in an attempt to curb the current account deficit). However, this also dampens demand for Indonesian bonds. The 10-year yield rose to the highest level since February 2014.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the May 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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On Thursday 12 June 2014 it was decided at the central bank’s Board of Governors’ Meeting to maintain the country’s benchmark interest rate (BI rate) at 7.50 percent, with the Lending Facility rate and Deposit Facility rate held at 7.50 percent and 5.75 percent, respectively. This decision is consistent with ongoing efforts to steer inflation back towards its target corridor of 4.5±1 percent in 2014 and 4.0±1 percent in 2015, as well as to reduce Indonesia’s current account deficit to a more sustainable level.

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Car sales in Indonesia declined 8 percent to 98,198 units in May 2014 from 106,811 units in the previous month. The Indonesian Automotive Industry Association (Gaikindo) said that the decline was the direct consequence of several public holidays (International Labour Day and the commemorations of Buddha’s birthday as well as ascensions of Prophet Muhammad and Jesus Christ). These holidays caused a lower car production rate and a reduced number of car deliveries to wholesale dealers.

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According to Statistics Indonesia (BPS), the country's balance of trade in April 2014 recorded a deficit of USD $1.96 billion, after having recorded a surplus of USD $0.67 billion in March. The balance of trade performance in April 2014 was particularly affected by the country's non-oil & gas balance, which turned from a surplus into a deficit, whereas a lower deficit in the oil & gas trade balance was realized (compared to March 2014). Meanwhile, inflation in May 2014 was slightly higher at 0.16 percent (mtm) from the previous month.

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